China’s rare earth export curbs disrupt global EV supply chains

China’s decision to tighten control over rare earth element exports has triggered a ripple effect through the global economy, striking at the core of electric vehicle manufacturing, renewable energy development, and advanced defense systems. The export restrictions, particularly those targeting technologies used in processing rare earth magnets, reinforce China’s strategic leverage over a resource essential to the world’s green and digital transition.

With more than 90 percent of global rare earth refining capacity under its control, China’s policy shift, focused notably on samarium-cobalt magnets, directly affects the availability of materials critical to EVs, fighter jets, and missile guidance systems. The restriction, presented as a national security measure, comes amid ongoing tensions with the United States and its allies, especially over technology trade barriers.

Why rare earths are essential to EVs, defense systems, and more

Rare earth elements, despite the name, are relatively abundant but difficult to extract and refine. Their unique magnetic, luminescent, and electrochemical properties make them indispensable in high-performance technologies. Neodymium, dysprosium, and samarium are essential to permanent magnets used in electric motors, wind turbines, and radar systems.

In the EV sector, rare earths enhance motor performance and energy efficiency. A single electric vehicle can require several kilograms of these materials. In defense, samarium-cobalt magnets are preferred for their resistance to extreme temperatures and corrosion, making them ideal for aerospace and naval systems.

China’s global dominance in rare earth production and processing

China’s grip over the rare earth supply chain is the result of decades of strategic investment. Since the 1980s, Beijing has prioritized rare earth mining and refining, often absorbing the environmental and human costs. By underpricing global competitors, China gradually assumed control of the market.

Today, the country accounts for roughly 63 percent of global rare earth mining and more than 85 percent of processing. Its influence is even stronger in downstream segments, where raw minerals are transformed into magnets and alloys.

This level of integration allows China to use rare earth policy as a geopolitical tool. Previous restrictions in 2010, during a dispute with Japan, caused global prices to soar. The current round of restrictions has reawakened concerns about concentrated control over vital resources.

How countries are responding to rare earth supply vulnerabilities

The United States, Japan, and the European Union have intensified efforts to diversify rare earth supply chains. The US Department of Defense has increased support for domestic processing and recycling projects. Australia’s Lynas Rare Earths has expanded operations, and Brazil and Canada are exploring reserves.

Vietnam and India have also emerged as potential players. Western countries are investing in cleaner refining technologies to avoid the environmental costs seen in China. However, rebuilding an entire supply chain outside of China is slow, costly, and politically sensitive.

Researchers are also exploring rare earth-free alternatives, particularly for electric motors. While promising, these substitutes are still in early stages and not yet scalable.

A shifting landscape for critical materials and supply chain strategy

The reaction to China’s rare earth policy reflects a broader move to secure strategic materials. As clean energy and digital infrastructure become national priorities, rare earths are increasingly viewed through the lens of security and competitiveness.

For businesses and governments, the challenge lies in identifying dependencies, building stockpiles, and supporting alternative technologies. Initiatives like the US-led Minerals Security Partnership aim to ensure stable and ethical supply lines.

Whether these efforts result in a more balanced supply chain or deepen global fragmentation remains uncertain. What is clear is that rare earths have moved from obscure industrial inputs to central components of national strategy and industrial resilience.

Sources:
Business Standard